Letter from the Chief Executive Officer

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Dear shareholders,

While 2017 was a year of transformation for the company, we ensured that our commitment to you was constant. Since our stock market listing in 2011, we have distributed more than EUR1bn in dividends, thus rewarding the confidence that the investor community has placed in our company. For 2018, the General Shareholders’ Meeting will propose to shareholders the distribution of a gross dividend of EUR0.18 per share, to be charged to the 2017 results.

During 2017, we continued to carry out network conversion operations, with the remodelling and improvement of 613 stores, twice the number of stores that were improved in 2016 (307). This programme, in addition to improving the client’s shopping experience, reinforces DIA’s offer by including new product categories and a broader range. We are implementing this remodelling initiative in conjunction with consumers; accordingly, we conduct more than 30,000 surveys each month so that we know consumers’ main demands first-hand, which then allows us to take corresponding action. This initiative has already borne its first fruits, with a marked improvement in the satisfaction index of our clients in the more than 500 remodelled stores.

Digitalisation remains a priority for us, with the aim of achieving both an improvement in operating efficiency and the combination of new solutions, allowing us to adapt faster to consumer habits. Our exponential e-commerce development, the signing of agreements with third-party online sales specialists, the rollout of technological applications developed in-house to streamline process, the creation of a digital talent search platform, and the digitalisation of commercial services have all led to a change in corporate management, allowing us to make progress in terms of our profitability and efficiency targets.

Our more than 7,000 own-label SKUs remain a fundamental pillar of DIA’s strategy. The combined efforts of our more than 4,500 suppliers, of which close to 90% are local, allow us to focus on our proximity proposition, providing immediacy and allow us to adapt fast to consumers’ needs. During 2017, we continued to promote innovation, introducing 200 new SKUs, which are always aligned with the listening initiatives and information sharing with our customers. I highlight here the creation of a new own label, Vital, focused on products linked to a balanced and healthy diet.

Partnerships with third parties allow us to make progress in terms of our efficiency and profitability targets. In addition to our existing partnerships, in 2017 the Red Libra company was created, together with Eroski in Spain, for the joint negotiation with own-label suppliers and CD Supply Innovation with Casino, which is in charge of managing the financial services and logistics for own-label suppliers.

DIA’s more than 3,700 franchises have already become an international benchmark thanks to the efforts and dedication of these entrepreneurs, who provide very valuable knowledge thanks to their proximity to the customer and their understanding of the local environment and who contribute significantly to the company’s growth and that of the local economy. We are increasingly focused on the DIA franchises, and they deserve all our support and respect.

I am not forgetting our more than 42,000 employees worldwide. 2017 has been a difficult year, and we have launched a lot of projects that are set to bear fruit very soon. I have enormous confidence in our teams; they are the ones whose work and efforts will make it possible for us to achieve our targets.

Turning to results, the fiscal year ended with sales of EUR10.3bn, implying a slight increase of 0.2% versus 2016. Adjusted EBITDA fell by 9.4% in 2017 to EUR568.6m, down 8.9% at constant currency. This decrease was reflected in the 65bp drop in the adjusted EBITDA margin, which amounted to 6.6% in 2017 due to the policy of investing heavily in prices.

In this respect, I would like to highlight that despite the price policy implemented, our Dia banner achieved adjusted EBITDA margins of more than 8% in Spain, while La Plaza and Clarel continued to boost their operating margins.

In the other countries in which we operate (Brazil, Argentina, and Portugal), we have reached the targets we set for the year. I would like to highlight the strong performance of our business in Latin America, where the sharp decrease in inflation and low level of consumer confidence has hampered sales growth. However, these challenging conditions have not stopped DIA from capturing significant market share both in Argentina and Brazil, while also improving their profitability rates.

I am convinced that we are now at a very good starting point. We have recovered in terms of competitively and good prices, and we have a unique opportunity to reinvent the proximity concept. The new commercial propositions in Spain and Portugal, as well as the expansionary pace in Argentina and Brazil, have allowed us to focus on an agile and efficient model that is increasingly customer-centric.